How Much Should I Contribute to a 401(k) in My 30s?

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Reaching your 30s typically means you begin to earn a lot more money, but it’s also when you face much bigger expenses. This complicates decisions over how much money you should set aside for retirement — including how much to contribute to your 401(k) account.

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Higher income usually means more money available for 401(k) contributions, but that might not be possible if you suddenly have new children or a new mortgage. Many find it difficult to contribute enough to reach the yearly limit.

It will be an even bigger challenge beginning next year because of a steep rise in the 401(k) contribution limit. On Oct. 21, 2022, the IRS announced that the limit will rise to $22,500 in 2023 from $20,500.

Deciding how much you should contribute to a 401(k) in your 30s largely depends on how much money you earn, and how much of it has to go toward living expenses and debt.

Higher Income, Higher Expenses in Your 30s

You could start seeing your salary rise once you hit your 30s. The median income for Americans 25- to 34-years-old is $52,156 a year — nearly $16,000 more than those 20 to 24, according to the U.S. Bureau of Labor Statistics. The median income rises to $62,244 once you hit ages 35 to 44.

Retire Comfortably

But your bills also tend to go up in your 30s. Not only do many Americans start families at this age, but they also buy their first house. The typical first-time home buyer in 2021 was 33 years old, Motley Fool reported, citing data from the National Association of Realtors.

Because of higher expenses, you first want to make sure your income can cover all of your bills. After that, it’s a good idea to pay down high-interest debt and establish an emergency fund.

“Typically, at younger ages it is hard to contribute the maximum amount to retirement plans because of other goals — paying off college loans, buying a house, etc. There has to be a balance between the goals,” Lisa Featherngill, national director of wealth planning at Comerica Bank, told GOBankingRates in an email.

If you do have the financial wherewithal to contribute the limit, however, she recommends doing so.

“In your 20s and 30s the compounding of the extra savings could be significant by the time you retire,” Featherngill said.

Retire Comfortably

If nothing else, you should contribute at least enough to your 401(k) to meet the employer match, according to Thrivent, a financial services group. Moving forward, aim to increase your savings rate by a percentage or two each year — especially if your salary increases. Growing your contribution rate every year can put you on the path to reaching the contribution limit.

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Once you have reached a certain financial comfort zone, Fidelity recommends saving 15% of your pre-tax income a year, including the employer match. If your financial circumstances change and you need to lower your contribution rate, most plans allow you to do that.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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